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Self employed pension contributions pitfalls
Since 2011 the annual sum that can be paid into a pension has fallen from £255,000 to £40,000 (or up to 100% of earnings, whichever is smaller). In certain circumstances this is reduced to £10,000. Beware, making a mistake and paying in more to your pension than the annual allowance results in draconian tax bills!
Yes, if you have not made any contributions to your pension in the last three years, you can utilise the full three years allowance -[say...3 * £40K] and the tax relief on the contribution is either 20% for basic rate or 40% for a higher rate payer. Certainly trying to make regular, affordable, payments to your pension is the most prudent way to plan but recently research showed that as many as two-thirds of self-employed workers have no savings whatsoever for old age.
In many cases self-employed people have tended to leave putting larger sums into their pension pots until they either have a really exceptional year or they sell their businesses and have a larger sum available to pay in. Beware - exceed £150,000 income in a year and the allowance falls to just £10,000 [3* £10K if no previous contributions made for three years] exceeding the allowances will mean very large tax bills!
At Winchester Bourne we can help you plan ahead, we can make sure you are informed, we can provide accurate accounts and forecasts of income to help you plan your savings for the future and working with our professional partners find the right pension and investments plan to suit you, now and for the future.
Call sarah on 01962 715671 or email firstname.lastname@example.org
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